A method of forecasting the demand shift to competitive new products and its applications

This paper presents a method for predicting the process in which a product newly introduced in a competitive market replaces existing products, thereby creating the market for itself. The basic approach and algorithm of the method are described, along with sample applications of the method to demonstrate its validity. Demand prediction for new products is a formidable task, chiefly because of the lack of the availability of sufficient time-series data compared to the large number of factors to be considered. The basic assumption used here is that the degree of demand shift from a product to another competitive product is determined by the relative evaluation of those products by users. Evaluation values for each of the evaluation factors are aggregated to obtain an intermediate variable, which is called the totalized relative evaluation value. The totalized relative evaluation value can then be used to give a quantitative prediction. Qualitative information is used to complement the lack of quantitative data, whenever necessary. The demand shift ratio for a new product is directly predicated in this method. Therefore, the prediction equation is parsimonious and does not contain a large number of terms. The demand shift ratio is defined simply as the ratio of demand for the new product to total demand in the market, which is the sum of the demand for the new product and existing products.